Arrow Gear Company v. Downers Grove Sanita

Dec 10: In the U.S. Court of Appeals, Seventh Circuit, Case Nos. 09-1509, 09-4030. The Appeals Court explains that in 2008 the appellees, Arrow and Precision, brought separate suits under section 113(b) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), seeking contribution -- seeking to shift some of the costs that Arrow and Precision had incurred, as a result of having been found liable for groundwater contamination, to other polluters of the same site.

 

    Those other polluters are the defendants in Arrow's and Precision's suits. The district court dismissed the suits as barred by res judicata [i.e. a matter already judged]. The Appeals Court said, "We have consolidated the appeals, but discuss only Arrow's appeal because Precision's presents no additional issues. We address issues of appellate and trial-court jurisdiction, res judicata, and interpretation of settlement agreements."

 

    In 2004 a class action, Muniz v. Rexnord Corp., was brought in federal district court on behalf of residents of the contaminated area against a number of the polluters, including Arrow, on a variety of grounds. The suit asked for damages, mainly for impairment of property values. The parties agreed in 2006 to a settlement of (in round numbers) $16 million. The defendants had then to allocate the expense among them, and they did so in a series of agreements.

 

    The Appeals Court said in its conclusion, "It would have been difficult to settle all possible claims by the cross-claiming defendants before their total liability was determined. So claim splitting -- allocation of the $16 million first, and of the additional $5 million (which will doubtless grow) second -- made sense, and the district court should not have forbidden it. True, the order dismissing Muniz had not mentioned the settlements, and some of them had postdated the dismissal. But as parties to the settlements the defendants were bound by them regardless of when they were made and whether they were mentioned in a judicial order.

 

    But as parties to the settlements the defendants were bound by them regardless of when they were made and whether they were mentioned in a judicial order. Were there doubt about the scope of the settlements, we would have to remand for further proceedings to still that doubt. But there is no doubt that the settlements confine release to claims by defendants against one another concerning the allocation of the $16 million. So the defendants have no defense of res judicata to the present suits, and the judgment of the district court is therefore reversed with instructions to reinstate the suits."

 

    Access the complete opinion (click here).